Wealth distribution

[Husar]

You guys are missing an important point.

Our money system is based on debt creation. Banks make their money from lending. The fractional reserve system allows the creation of money based on that debt.

It makes no difference if it is the government borrowing the money or the family buying a house or just taking a cash advance from their credit card.

Money is not based on any real assets. There is no gold or silver involved as in the past.

Banking interests loan you what they don’t have to pay for real things. Then when you default they are covered by insurance of the loan but also get to take the real assets and resell them, usually creating more debt.

Convincing some poor sod to go into debt just makes them wealthier. You put the focus on individuals. What about what our brilliant governments owe.

But that was my point all along. The education required to make good decisions in our system is not evenly distributed. And then rich people incite poor people to make bad decisions and afterwards they blame them for having made those bad decisions which accidentally caused the rich guys to make a profit.

[Fragony]

But that was my point all along. The education required to make good decisions in our system is not evenly distributed. And then rich people incite poor people to make bad decisions and afterwards they blame them for having made those bad decisions which accidentally caused the rich guys to make a profit.

If we keep it to America, look up the community reinforcement act of the Carter administration. You will immediatly understand why people bought houses they can't afford.

[Seamus Fermanagh]

Well, my reply to GC seems to have sparked some VERY nice discussion.

I do not object to taxation. The Athenian approach, as noted above, is even more inane.

I do not particularly want higher taxes -- though fewer loopholes written for one company and such would be a nice improvement.

My objection is with the form of taxation. If the goal of a tax system is and should be wealth redistribution....then tax wealth. Taxing income only gets in the way of those trying to achieve; it does not touch the "this isn't income" plutocrats whom GC decries so much in the first place.

I have a bright chap in my comm class, b-student who owns his own tattoo parlor, who has been "paid" little or nothing since he bought a piece of the business, instead granting himself "stock" compensation in a closely held corp so that he can be taxed at 15% and not 35%.

Our current emphasis on income tax, at least as framed, fails to generate the revenues needed for sweeping improvements such as those suggested by Horetore and GC, AND manages to create stumbling blocks to wealth achievement. Trending towards the worst of both.

[Rhyfelwyr]

Unless tax levels were ever made truly crippling, they will not do much to affect income inequality - it would be a token measure at best.

Taxation is not the answer. Welfare is only a short-term answer. Education is no longer the answer, as my own life testifies.

As things stand, a big chunk of the population has neither the incentive nor the means to improve their lot in life. IMO the solution is to help the ordinary worker to produce their own wealth, which would require a whole host of very broad and varied measures. That would stop the inequality at the source, rather than merely curbing its excesses as taxation aims to do.

[HoreTore]

Money is not based on any real assets. There is no gold or silver involved as in the past.

Go read a book or two on economics. This sentence(along with a few others in your post) makes no sense whatsoever.

The price of gold is based on the exact same thing as today's money, which you refer to as "no real asset".

[HoreTore]

Well, my reply to GC seems to have sparked some VERY nice discussion.

I do not object to taxation. The Athenian approach, as noted above, is even more inane.

I do not particularly want higher taxes -- though fewer loopholes written for one company and such would be a nice improvement.

My objection is with the form of taxation. If the goal of a tax system is and should be wealth redistribution....then tax wealth. Taxing income only gets in the way of those trying to achieve; it does not touch the "this isn't income" plutocrats whom GC decries so much in the first place.

I have a bright chap in my comm class, b-student who owns his own tattoo parlor, who has been "paid" little or nothing since he bought a piece of the business, instead granting himself "stock" compensation in a closely held corp so that he can be taxed at 15% and not 35%.

Our current emphasis on income tax, at least as framed, fails to generate the revenues needed for sweeping improvements such as those suggested by Horetore and GC, AND manages to create stumbling blocks to wealth achievement. Trending towards the worst of both.

I favour taxing what is owned rather than what is earned, even though the end result probably isn't that big since the state has to rake in the same amount of money, and that for the most part means the same people paying.

I could go on and on about how wealth taxation is better than income taxation, as the last election in Norway had removal of wealth taxation as one of the hot issues, and I argued endlessly with friends on how we should instead increase the wealth tax and reduce the income tax. The biggest problem with the wealth tax is the human brain: we react strongly to something being "taken away"(why do I have to pay tax on this house I already paid for?!?!?), but we don't really react at all if we don't get the chance to buy that thing. But since we seem to be all in agreement here, I won't do the wall of text-thing now...

[Ironside]

I have a bright chap in my comm class, b-student who owns his own tattoo parlor, who has been "paid" little or nothing since he bought a piece of the business, instead granting himself "stock" compensation in a closely held corp so that he can be taxed at 15% and not 35%.

Our current emphasis on income tax, at least as framed, fails to generate the revenues needed for sweeping improvements such as those suggested by Horetore and GC, AND manages to create stumbling blocks to wealth achievement. Trending towards the worst of both.

Increasing the capital gain taxes to normal income taxes or even the highest levels are a great reform for the US. Honestly, anybody going for a grassroot campaign should start here. It's easy to explain, easy to implement, simple and the top politicians will never touch it by themselves. Because they use it. And pay less taxes than those employed in the White House because of it.

Who has a lot of capital gain? Wealthy people. CEO:s who's changed their salary into divends. It slows down wealth accumulation and works as an indirect wealth tax.

[Fisherking]

Go read a book or two on economics. This sentence(along with a few others in your post) makes no sense whatsoever.

The price of gold is based on the exact same thing as today's money, which you refer to as "no real asset".

If you fail to understand this, you need to be the one reading up on fiat money and fractional reserve lending.

[Montmorency]

All "money" is ultimately fiat money.

[HoreTore]

All "money" is ultimately fiat money.

Indeed.

Gold is only marginably more valuable than the cotton in our current bills. Arguing a return to the gold standard is missing the point completely. Especially if you then believe that the value of money will be based on something other than what it is currently based on.

Money has always been and will always remain based on the production value of work. That's the basis of it, gold and cotton is simply the way we represent that value, and we do so because it's a lot easier to carry around a few bills than it is to carry around 2-3 cows.

[Seamus Fermanagh]

I favour taxing what is owned rather than what is earned, even though the end result probably isn't that big since the state has to rake in the same amount of money, and that for the most part means the same people paying.

I could go on and on about how wealth taxation is better than income taxation, as the last election in Norway had removal of wealth taxation as one of the hot issues, and I argued endlessly with friends on how we should instead increase the wealth tax and reduce the income tax. The biggest problem with the wealth tax is the human brain: we react strongly to something being "taken away"(why do I have to pay tax on this house I already paid for?!?!?), but we don't really react at all if we don't get the chance to buy that thing. But since we seem to be all in agreement here, I won't do the wall of text-thing now...

Clear thinking on your part. If your goal is wealth redistribution from rich to poor (I don't agree with that goal as you know, but that does seem to be the goal behind using taxation to re-balance society) then taxing anything aside from wealth is counterproductive. Taxing income means taxing the actively employed middle class...the backbone of all Western economies...but only taxes the "current accounts" of the rich.

It is one of the things I find idiotic in the USA right now. We have a progressive income tax that, in practice, hammers the upper middle class and drains the wealth accumulation potential of the working class, while shielding from taxation the very people the US political left blames for the imbalance. The solution? Higher taxes on corporations (which are passed to the working class in higher prices) and higher income taxes on wage earners over 150k (which includes lots of owner operator small businesses and other small business employers, thus discouraging job creation; and yes, it does take thousands of dollars more from the salaries of big corp CEOs....who make less than 20% of their compensation in salary and are taxed at 15% (lower then their staff's income tax rates) on the rest.

The system, as currently constituted, is inane.

Give me a modified consumption tax like the Fair Tax or a flat tax on all earnings (of any form or stripe, no exceptions).

[HoreTore]

If your goal is wealth redistribution from rich to poor

Taxation is only "a means to a means to an end", it is not the way to achieve the goal.

As I said previously, taxation is only important due to what you can do with that tax money. The actual answer to poverty is meaningful employment in private sector jobs with proper wages, for all. Taxation alone isn't going to do anything towards that goal.

Even though I agree with you on wealth v income tax, I wouldn't go so far as to abolish the income tax altogether. Tax diversification is also important, both to ensure a stable tax revenue(you can't plan long term without stability) as well as lessen the impact of loopholes.

But even more important, the process needs to be simple. If I need to do anything more than I currently do to pay my taxes(which is reading a letter from the government every january for half a minute before throwing it in the trash), I'll storm the bastille.

[Tellos Athenaios]

As an interesting aside, the price of gold is fairly arbitrary but it is not quite the same as fiat money. The reason is mostly the chemical properties of gold (which mean that you can store it and transport it in a practical fashion) and the fact that is not actually rare without being plentiful (unlike, say, Xenon, Helium or Iron). You need your money to be not too difficult to obtain or else very few people can use it. Its chemical properties also mean you are quite likely to find it in its metallic crystalline form, which means it's likely to be shiny which humans happen to find interesting and attractive. So it makes for a good gift or money as it is both expensive (so the recipient can appreciate the effort) and quite useless (so there is little incentive to demand too much of it, damaging real productivity).

The flipside means that in a modern, advanced economy gold is subject to speculation and other manipulations like any other common commodity. In these days you might as well pick 'oil' as your money.

[Pannonian]

Give me a modified consumption tax like the Fair Tax or a flat tax on all earnings (of any form or stripe, no exceptions).

How does a Fair Tax work better than Income Tax? As I understand it, it's a kind of Value Added Tax, which in the UK has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

[Lemur]

[A FairTax] has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

There are actually terms for this.

A tax that gets smaller as more wealth is involved is called a regressive tax.

A tax whose marginal rate increases as more wealth is involved is called a progressive tax.

[HoreTore]

Ideally and theoretically, I like the idea of a consumption tax as the main form of taxation.

However, I fear it will be eaten alive by the iron law of unintended consequences the minute it hits reality, and so I don't really consider more than a supplement to other taxation...

[Seamus Fermanagh]

How does a Fair Tax work better than Income Tax? As I understand it, it's a kind of Value Added Tax, which in the UK has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

Not sure if it would function as well as designed in practice. The Fair Tax is supposed to function as noted here. Yes, it is a wiki, but it is pretty religiously "policed" by Fair Tax advocates and is a fair summary of their approach. The basic idea is to be revenue neutral, but to tap into currently untaxed aspects of the economy (black and gray markets because the money is eventually used to buy something that is subject to the tax). Ostensibly, the Fair Tax would replace ALL other forms of federal taxation -- excises, income tax, Spanish war tax on telephones etc. Supposedly, the "prebate" lowers the effective tax burden on lower income families, down to an effective federal tax burden of 0% on necessities.

The Fair Tax has detractors as well, who argue that it is a waste of time because it won't work as planned or, more commonly, because it is politically undoable and hence a waste of time.

[Pannonian]

Not sure if it would function as well as designed in practice. The Fair Tax is supposed to function as noted here. Yes, it is a wiki, but it is pretty religiously "policed" by Fair Tax advocates and is a fair summary of their approach. The basic idea is to be revenue neutral, but to tap into currently untaxed aspects of the economy (black and gray markets because the money is eventually used to buy something that is subject to the tax). Ostensibly, the Fair Tax would replace ALL other forms of federal taxation -- excises, income tax, Spanish war tax on telephones etc. Supposedly, the "prebate" lowers the effective tax burden on lower income families, down to an effective federal tax burden of 0% on necessities.

The Fair Tax has detractors as well, who argue that it is a waste of time because it won't work as planned or, more commonly, because it is politically undoable and hence a waste of time.

What has been the experience with VAT in the UK is that poor and rich alike pay taxes at the point of purchase. But with the poor consuming necessities the same as the rich, the tax paid on these necessities is a much bigger proportion of their income/savings than the same thing paid by the rich. Perhaps it's a bigger chunk in absolute terms as well as the rich can afford to buy a large amount in one go, and sellers are willing to offer discounts if they get their money in one large chunk, whereas the poor need to stagger their purchases which thus precludes discounts. And as for the consumption tax replacing all taxes, the poor have a much lower base rate anyway, and it still hardly helps them cope with price rises.

Just about the best thing that's happened with VAT is the free rein to tax whatever the government likes on consumer drugs like tobacco, alcohol, etc. The most sensible thing they can do is legalise and add cannabis and other currently prohibited stuff to it. Politically impossible though alas.

[Fisherking]

All "money" is ultimately fiat money.

You are basically correct.

Indeed.

Gold is only marginably more valuable than the cotton in our current bills. Arguing a return to the gold standard is missing the point completely. Especially if you then believe that the value of money will be based on something other than what it is currently based on.

Money has always been and will always remain based on the production value of work. That's the basis of it, gold and cotton is simply the way we represent that value, and we do so because it's a lot easier to carry around a few bills than it is to carry around 2-3 cows.

You are totally incorrect.

This is how money used to act.

If you pay attention this may teach you something: https://www.youtube.com/watch?v=l_IgcmsqnVM


Reforms would also make wealth redistribution possible.

[Lemur]

Related, and interesting:

Why do the Super-Rich Feel so Persecuted?

The extremely wealthy are objectively far wealthier, far more politically powerful and find a far more indulgent political class than at any time in almost a century—at least. And yet at the same time they palpably feel more isolated, abused and powerless than at any time over the same period and sense some genuine peril to the whole mix of privileges, power and wealth they hold.

There is a disconnect there that is so massive and glaring that it demands some sociocultural explanation. [...]

I saw several years ago that many of the wealthiest people in the country, especially people in financial services, not only didn't support Obama (not terribly surprising) but had a real and palpable sense that he was out to get them. This was hard to reconcile with the fact that Obama, along with President Bush, had pushed through a series of very unpopular laws and programs and fixes that had not only stabilized global capitalism, saved Wall Street but saved the personal fortunes (and perhaps even the personal liberty) of the people who were turning so acidly against him. Indeed, through the critical years of 2009, 10 and 11 he was serving as what amounted to Wall Street's personal heat shield, absorbing as political damage the public revulsion at the bailout policies that had kept Wall Street whole.

Let's start by stipulating that no one expects the extremely wealthy to react happily to mounting discussion of wealth and income inequality or left-wing diatribes about "the 1%." But again, the reaction is extreme and excessive and frequently runs into less comical versions of Perkins' screed, with weird fears of persecution and threat from the folks who quite truly rule the roost.

Also: The Cognitive Dissonance Of The One Percent

[M]any of these extremist plutocrats must surely know, somewhere in their psyches, that they collectively failed—and failed terribly—in self-regulating and thereby protecting the very capitalist system they depend on for so much.

These masters of the universe had to go cap in hand to the federal government to bail out their sorry, incompetent asses. They were revealed not as brilliant engineers of our collective wealth, but as enablers of the debt-mania, tech-hubris and bubble-creating that destroyed so much from 2007 onwards. They were exposed as something much worse than greedy; they were revealed as incompetents whose mistakes and over-reach created untold misery and hardship for countless millions. Their own self-image—again, somewhere deep down—must have shattered a little.

People respond to revelations of their own incompetence in different ways. But the proudest—and this group of people are not exactly renowned for humility—can sometimes respond by internalizing an ever more extreme version of their own previous mindset. They cannot compute the fact that they failed, and so they have to construct a version of reality that insists it was all someone else’s fault, and then build on that an ideology of their own unrelenting heroism, which is now, on their minds, unfairly impugned. And the only target of blame that can plausibly fill the gap is the federal government.

[Fisherking]

lol.

Yes, very funny. Norway uses the same system. Fractional Reserve Lending.

You money is created from debt just like everyone else’s.

[HoreTore]

Yes, very funny. Norway uses the same system. Fractional Reserve Lending.

You money is created from debt just like everyone else’s.

Youtube University strikes again!

Try offering someone with actual knowledge as opposed to a dimwit activist with no qualifications beyond high school next time.

This is your source:

I soon caught the Mother Earth News bug, started doing yoga at 4 am with people in white turbans, chanting with Krishnaites and then suddenly got the urge to go West.

Now that's an authority on world economics if I ever saw one!!

[gaelic cowboy]

Why is everyone on the tinterweb mad about fractional reserve lending when its bloody central bank interest rates that cause more harm.

That blooming Zeitgeist crowd has a lot to answer for

[HoreTore]

Why is everyone on the tinterweb mad about fractional reserve lending when its bloody central bank interest rates that cause more harm.

That blooming Zeitgeist crowd has a lot to answer for

Fractional reserve lending has been the way banks have functioned since paper money was introduced back in the 18th century. And to top it off, the bank informs you of it every time they send your statement. Why on earth would banks give you interest on deposits if they didn't lend it out again? The reason why the tinfoil crowd throws a hissyfit over it, is because it:
a) is a suitably technical term
b) can be made to look suitably evil by playing around with motives and other nonsense
c) is not something the average tinfoiler knows about, since the tinfoilers knowledge of economics in particular and how the world functions in general, is close to zero

There are plenty of other completely mundane things conspiracy nutters twist into something horrible. Fluoride water immediately pops into mind, as well as GMO.

[Myth]

The quality of discussion has dropped dramatically.

[Seamus Fermanagh]

The quality of discussion has dropped dramatically.

You realize that people have been saying that since Q.T.Cicero's time...and probably before.

[Fisherking]

HoreTore thinks just because it is the way it has always been done that it is the only way things should be done. Either that or he fears someone might find a conspiracy somewhere in the material.

But it is not the way it has always been done.

There are several alternatives to who controls the money supply.

The topic was Wealth Distribution and how to equalize it. It is hard to discuss that without addressing the mechanics of fractional reserve banking.

All money systems have pitfalls.

Rather than learn about the alternatives he would much rather attack the source without knowing what is in it.

Of course it is beneath his great wisdom…

Governments taking control of the money system is not the worst alternative.

In fact it is how most people believe money is created.

But rather than discuss inequities and alternatives, he would rather see people searching for conspiracy.

He seems to have intellectually crippled himself by trying to stay in what he believes is “The Main Stream”. How very conservative!

[Myth]

You realize that people have been saying that since Q.T.Cicero's time...and probably before.

And probably they are right

[HoreTore]

HoreTore thinks just because it is the way it has always been done that it is the only way things should be done. Either that or he fears someone might find a conspiracy somewhere in the material.

But it is not the way it has always been done.

There are several alternatives to who controls the money supply.

The topic was Wealth Distribution and how to equalize it. It is hard to discuss that without addressing the mechanics of fractional reserve banking.

All money systems have pitfalls.

Rather than learn about the alternatives he would much rather attack the source without knowing what is in it.

Of course it is beneath his great wisdom…

Governments taking control of the money system is not the worst alternative.

In fact it is how most people believe money is created.

But rather than discuss inequities and alternatives, he would rather see people searching for conspiracy.

He seems to have intellectually crippled himself by trying to stay in what he believes is “The Main Stream”. How very conservative!

I try to stay in the realm of sanity, away from theories pushed by new age hippies with neither education nor qualifications.

If you're going to take apart the monetary system, I do expect a certain level of actual knowledge. Failed art classes and TV-jobs doesn't quite cut it.

[Fisherking]

I try to stay in the realm of sanity, away from theories pushed by new age hippies with neither education nor qualifications.

If you're going to take apart the monetary system, I do expect a certain level of actual knowledge. Failed art classes and TV-jobs doesn't quite cut it.

But you really wouldn’t know, as you merely found it astatically displeasing and didn’t watch.